Often those that criticise others reveal what he himself lacks." - Shannon L. Alder
For the sixth straight week, the market posted a weekly decline in a holiday-shortened trading week last week. June started off on a down note as the market fell again largely as a result of the sell-off of the FANG stocks yesterday. We did get a huge relief rally on Tuesday thanks to some dovish comments from the Federal Reserve as well as hopes that the recent trade tiff with Mexico will quickly be resolved.
However, escalating trade tensions continue to roil equities. With second quarter earnings season still some six weeks away, it is hard to see the market rallying until we see some progress resolving some of these trade tensions, especially with China. Small caps have been hit particularly hard over the past month even as they have little in the way of overseas sales.
So, with the recent decline in the markets since April, what are insiders finding enticing enough to buy with all the uncertainty facing the markets? Here are four names with recent and significant insider buying.
Let's start with AGNC Investment Corp. (AGNC). This Bethesda-based entity operates as a real estate investment trust or REIT. The company invests in residential mortgage pass-through securities and collateralized mortgage obligations for which the principal and interest payments are guaranteed by government-sponsored enterprise or by a United States government agency.
Like most concerns in this space, the stock has been under pressure recently due to worries about an inverted yield curve as well as a possible wave of mortgage refinancings. That has triggered the first insider buying in this name so far in 2019.
The company's CEO picked up just over 100,000 in new shares from May 24th through May 29th. As you recall last week, we profiled the insider buying in another mortgage REIT, ARMOUR Residential REIT (ARR). Like ARMOUR, AGNC pays an approximate 12% annual dividend yield.
Evidently, insiders are starting to see value in this sub-sector of the market even as most investors don't at the moment.
Next up is The Medicines Group (MDCO). This biotech concern saw heavy insider buying since mid-May from the same director. In three transactions May 20th through May 22nd, he bought 500,000 shares worth some $15 million. He then added 85,000 more shares in two transactions on May 29th and May 30th to close out the month. In March, it should be noted he purchased approximately 850,000 shares in four transactions in early March as well.
The May purchases followed the company disclosing encouraging Phase 2 trial results from its primary drug candidate inclisiran. Based on three year's follow-up, treated patients experienced sustained lowering of LDL-C (AKA, the 'bad' cholesterol) by more than 50% with twice a year dosing of inclisiran.
The analyst community is also becoming more sanguine on the company's prospects. Since April 26th, six analyst firms including Citigroup have upgraded, assigned, or reissued Buy or Outperform ratings on MDCO. Price targets proffered have ranged from $48 to $110 a share. Robert W. Baird upped its price target to $110 from $80 right after these trial results were disclosed. Baird's analyst 'these results have increased his conviction in inclisiran "ascending the Iron Throne" of PCSK9 drugs in ORION-9/10/11, for which top-line data are guided for in the third quarter. Phase 2 OLE results, he says, have effectively quashed bear safety concerns for inclisiran'.
These actions/events have helped the stock climb recently even with the difficult market environment.
Catalent (CTLT) sees the president of its gene therapy business buy more than $2 million worth of shares on May 29th. We just provided a 'deep dive' on the 'off the radar' mid-cap company this week. This individual was the president previously of Paragon Bioservices which Catalent recently acquired. Two directors bought a total of just over $500,000 worth of stock earlier this month, but the May 29th transaction is the largest single insider purchase I can find on this name on record.
Finally, TPI Composites (TPIC) sees four officers of the company including the CEO pick up just over $250,000 in aggregate of new stock over the past two weeks. TPI is based in my old stomping grounds of Scottsdale, AZ. The company manufactures and sells composite wind blades and related precision molding and assembly systems to original equipment manufacturers.
This is the first insider buying in this name since June of 2017. The company posted a loss of 35 cents a share for the first quarter on May 6th. That was short of expectations. Revenues grew 18% on a year-over-year basis to nearly $300 million which was a bit better than expectations. Some highlights of the quarter are covered in the chart above.
The stock has an approximate $750 million market cap. Analysts are fairly sanguine on the company's prospects. Since March 1, four analyst firms including UBS have reiterated Buy ratings on the stock. Price targets proffered have ranged from $34 to $43 a share.
The shares have been hit hard recently as the company has business interests in China and Mexico among other countries. Insiders seem to be signalling that this is something the company will manage through.
And those are four stocks seeing substantial insider buying even as the overall market continues to trade down.
Never try to discourage thinking, for you are sure to succeed." - Bertrand Russell
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Disclosure: I am/we are long MDCO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.